Forten Company, a merchandiser, recently completed its calendar-year 2013 operat
ID: 2483307 • Letter: F
Question
Forten Company, a merchandiser, recently completed its calendar-year 2013 operations. For the year, (1) all sales are credit sales, (2) all credits to Accounts Receivable reflect cash receipts from customers, (3) all purchases of inventory are on credit, (4) all debits to Accounts Payable reflect cash payments for inventory, and (5) Other Expenses are paid in advance and are initially debited to Prepaid Expenses. The company’s balance sheets and income statement follow.
The loss on the cash sale of equipment was $4,500 (details in b).
Sold equipment costing $45,800, with accumulated depreciation of $26,200, for $15,100 cash.
Purchased equipment costing $88,300 by paying $63,000 cash and signing a long-term note payable for the balance.
Borrowed $4,000 cash by signing a short-term note payable.
Paid $44,125 cash to reduce the long-term notes payable.
Issued 3,500 shares of common stock for $20 cash per share.
Prepare a complete statement of cash flows; report its operating activities using the indirect method.(Amounts to be deducted should be indicated with a minus sign.)
Forten Company, a merchandiser, recently completed its calendar-year 2013 operations. For the year, (1) all sales are credit sales, (2) all credits to Accounts Receivable reflect cash receipts from customers, (3) all purchases of inventory are on credit, (4) all debits to Accounts Payable reflect cash payments for inventory, and (5) Other Expenses are paid in advance and are initially debited to Prepaid Expenses. The company’s balance sheets and income statement follow.
Explanation / Answer
Cash flow statement - Indirect Method Cash flow from operating Income Net Income 145200 Add Depriciation 20000 Loss on sale of equipment 4500 Decrease in prepaid expense 500 Increase in note payable 4000 29000 Less Increase in accounts receivable 18000 Increase in merchandise inventory 29106 Decrease in accounts payable 53125 100231 Net cash flow from operating activity 73969 Cash flow from investing activity Increase in long term liabilities Sale of equipment 15100 15100 Less : purchase of equipment 63000 decrease in long term notes payable 44125 107125 Net cash flow from investing activity -92025 Cash flow from financing activity Dividend paid -53000 Issuance in common stock 17500 paid in capital in excess of par 52500 Net cash flow from financing activity 17000 Cash flow -1056 opening balance of cash 72000 closing balance of cash 70944 Net decrease in cash 1056